Brookings: Why the next big bank shouldn’t be the USPS

Brookings, May 31, 2018: Why the next big bank shouldn’t be the USPS

There’s an old joke that a banker is someone who lends you an umbrella when the sun is shining, but demands it back at the first sight of rain. We see this, too, in banks’ relationships to communities based on their socioeconomic status. In my neighborhood in the Philadelphia suburbs, there are financial institutions everywhere, of all kinds—global conglomerates, credit unions, community banks, and much else. Combining census data from 2010 and this useful tool from the National Community Reinvestment Coalition, my ZIP code has one physical bank branch for roughly every 1,500 people. But go south a few miles to northern Philadelphia, and that ratio changes to one bank branch per 8,000. Population density increases, poverty rates skyrocket, and banks’ brick-and-mortar investments make way for the much more expensive payday lenders and check-cashing services. It’s raining in Philadelphia, but banks seem to be in the business of selling umbrellas in the sunny suburbs.

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